The Exit Tax: What Happens When You Renounce US Citizenship

The US imposes an "exit tax" on certain individuals who renounce their citizenship or long-term permanent residency, treating it as if they sold all their worldwide assets on the day before expatriation. You're subject to the exit tax if you're a "covered expatriate" — meaning you have a net worth over $2 million, had average annual net income tax liability exceeding a certain threshold over the past five years, or failed to certify that you were tax compliant for the past five years. Covered expatriates pay capital gains tax on the deemed sale of assets over an exclusion amount (approximately $866,000 in 2024), and certain deferred compensation and retirement accounts face immediate inclusion in income. Non-covered expatriates — those below all three thresholds — face no exit tax. The decision to renounce citizenship has permanent and irreversible consequences beyond taxes, so consult both tax and immigration counsel before proceeding.